Investing in Cryptocurrencies in United Kingdom – The Full Guide For Starters With UK Regulated (FCA) Crypto Exchanges and Brokers

Investing In Cryptocurrency Guide

Guide For Investing in Cryptos From United Kingdom

Unless you have been living under a rock for the past 2 years, there is a good chance you have heard about cryptocurrencies and all the havoc they have been wreaking. Cryptocurrencies like Bitcoin and Ethereum have gained considerable momentum recently and the blockchain technology they are based on is also being adopted widely. What exactly is a cryptocurrency? This is a digital asset that has been developed and designed for functioning as a medium of exchange, similar to real life money, albeit- online. It is managed and maintained by cryptography, which acts as a security measure. The concept of cryptocurrency first came to light in 2009 with the creation of Bitcoin.

In the subsequent years, cryptocurrencies began to attract a bigger following and came to the attention of the media in 2013. However, it wasn’t until last year that they became the rage they are today. Yes, they have become one of the most popular assets being traded these days and more and more people have expressed their interest in this market. But, it is also a fact that they are highly volatile in nature, which means they can lead you to big profits as well as big losses. Nonetheless, as the world becomes more economically insecure with each passing day and the internet’s ever-evolving nature, a number of people are thinking about investing their hard-earned money into a platform that’s not just secure, but is also growing.

This is exactly what cryptocurrencies can offer you. If you are unsure of why to invest in cryptocurrencies, here are some great reasons starters should think about it:

Security

Cryptocurrency systems are based on cryptography and cryptographic security. This means that instead of trusting a financial institution such as a bank and its IT department for keeping your banking details and money safe, you trust in the ‘math’ when you invest in cryptocurrencies. This kind of security almost eliminates the chances of your account ever being compromised by an unauthorized third party. The ‘blockchain’ is the very nature of cryptocurrencies that protect it from being compromised. Since it depends on a ‘proof of work’ system, they are able to offer better security than any other option.

What does this mean? It simply means that when a transaction has been made and confirmed on the blockchain, there is nothing that can be done to undo it. Once confirmation has been received, the transaction will become part of an immutable history record of transaction. Hence, this kind of technology ensures that nothing can be forged or reversed. It is also important to note that once a transaction has happened, almost everyone across the network will know about it immediately and this adds more emphasis to the level of security.

Miners are responsible for completing the transaction process as they are the ones who can actually confirm the transactions. They take a particular transaction, give it a stamp of being legitimate and legal and then spreads it across the network where it is added by every node to its database thereby becoming part of the blockchain. This technology and the ‘proof of work’ system is something that can only be found in cryptocurrencies. It has proven to be one of the most attractive features and has gained the attention of investors who are weary of institutional and government interference in transactions and traditional investments and banking. When you invest in cryptocurrencies, you can rest assured in the knowledge that there is no chance of anyone other than the miners becoming involved in your transactions.

Another assurance of security is the fact that your crypto coins are locked in a cryptography system and they can only be sent by the owner of the private key. The magic of big numbers and strong cryptography make it impossible to break down this system. In fact, the security of a Bitcoin address is better than Fort Knox.

Privacy and Anonymity

Once, there was a time when the anonymous nature of cryptocurrencies was an advantage to those operating on the ‘dark web’. However, the pseudonymous nature of these virtual currencies has also turned out to be a benefit for everyday traders and investors. This is due to the fact that the neither the accounts and nor the transactions can be connected to the real world identities of traders or investors. Once a crypto address has been provided, it cannot be tracked as these addresses are essentially random chains comprising of 30 characters. The transaction flow can be analyzed through this information, but the identity cannot be discovered through the addresses.

This anonymity and privacy was one of the founding features of Bitcoin, the pioneer cryptocurrency itself. It prevents external organizations, parties or governments from learning what you are buying or investing, from whom you are purchasing it and what you have spent in total.

Transaction Fee

Another quality of cryptocurrencies that has added to their popularity is the lower fees that’s incurred when using them as compared to other money transaction processes. Usually, there is very little or no transaction fee involved in the case of a cryptocurrency exchange because the network compensates the miners. The only fee that the operators have to deal with is what they have to pay to the third party that is involved in developing and maintaining their wallet. If you compare this low or even non-existent fee to that charged by online payment services such as PayPal or traditional banks, you realize exactly how much you will be saving.

Moreover, not only do you get to save money in terms of fee, but the money can also be used for investing elsewhere. Also, these fees and extra charges are the reason why a lot of people don’t use banks or these online services for making payments and are unable to become part of the commercial and trading world. Luckily, cryptocurrency can change all this.

Portability

Have you ever tried to carry a huge sum of money abroad? Even if you haven’t, you are possibly aware that it can be quite difficult to do so in certain jurisdictions. This issue is also solved with cryptocurrencies as they are legally and easily portable. If you go with traditional major currencies, it can be difficult to carry around a large sum. There are several reasons why it is risky to carry cash amounting to millions due to which lots of people have begun to prefer cryptocurrencies. You can take millions worth of cryptocurrencies with you easily as they can easily be stored on a memory card or USB and no one would know.

Barrier to Entry and Use

One of the biggest reasons why starters should consider investing in cryptocurrencies is that investing in them is permission-less and easy, unlike some traditional investment vehicles that can be difficult to jump into. Plus, cryptocurrencies can be accessed 24 hours a day. Thus, if you are interesting in accessing and using cryptocurrency, you don’t need to ask anyone for permission. You can send or receive Bitcoin and any other cryptocurrency without licenses, training or expensive software and no one can stop you from doing so. The bottom line is that cryptocurrency doesn’t have a gatekeeper and you can use your smartphone, laptop or desktop PC for buying or selling cryptocurrency at any time during the day or night.

Speed of Transactions

Obviously, with advancement, payment methods have been introduced that can be used for making faster transactions. While they are certainly great, they also have their limitations. There is a cap on how much can be sent and there are charges that are also incurred. In addition, the location where the payment is being sent can also determine how long it would take for the transaction to be processed. All these hassles are eliminated when you invest in cryptocurrencies because they can be sent anywhere and at any time and will arrive within a few minutes, if not less.

As soon as the payment is processed by the currency network, your transaction will be complete. These cryptocurrency transactions have been designed to be globally available and incredibly fast, at the same time. It doesn’t matter where you are based or where the currency is being sent; the global network of computers, which is responsible for processing transactions will ensure that your cryptocurrency reaches its desired location faster than banks or other financial institutions. This speed is another reason why cryptocurrency is great, especially for those who are interested in short-term investments.

No Debt

As opposed to the normal banking system, cryptocurrencies are the bearer and have no debt. Debt creates the Fiat-money that you see in your bank account and these numbers only represent debt and nothing more. Put simply, it is a system of IOUs. On the other hand, cryptocurrencies don’t represent debts and are their own representative. They are money as physical as the coins of gold and the number that’s reflected is the exact amount you have.

Low Inflationary Risk and Controlled Supply

It has been argued by many there is one reason why cryptocurrency is able to trump Fiat currency such as GBP or USD; quantitative easing. Most of the cryptocurrencies that are available out there have a controlled supply, which means that there is no need to ‘print money’. As a matter of fact, the supply of tokens is limited by networks, even in the case where they have a high demand. For instance, in the case of Bitcoin, the supply is decreasing over time and is expected to reach its final number somewhere around 2140. There is a schedule that’s written in the code of these cryptocurrencies, which is used for controlling the supply of the token.

This code can be immensely beneficial because it can be used for calculating the monetary supply of a particular cryptocurrency at any given moment in time. There are no surprises and investors can be assured of the value of what they are purchasing. Thus, even though the term ‘currency’ has been added with crypto, these virtual currencies are far more similar to commodities such as gold and silver as they are in limited supply, and don’t bear a lot of resemblance to traditional Fiat money.

Apart from that, cryptocurrencies are also known to carry a lower inflationary risk. This is because most of the other currencies in the world are under the control of their respective governments. For instance, if a certain government implements the wrong policies, is faced by a crisis or becomes corrupt, consequently, their individual currency will suffer. At times, this is what causes fluctuation in a currency’s value and can also lead to printing more money. In contrast, cryptocurrency investors state that, when compared to other currencies, it carries a lower falling risk. This is primarily because Bitcoins and other cryptocurrencies are not dependent on a government’s policy, which can lead to hyperinflation, fluctuation or even, in some rare cases, complete collapse.

The gist here is that any cryptocurrency doesn’t depend on the economy of any specific country. Normal trends in the global economy do not have any impact on their value, which means that these virtual currencies can remain high, even in the worst of circumstances.

The Rising Price of Cryptocurrencies

While the past few reasons outlined exactly why it is a good idea to invest in cryptocurrencies from a feature and technology perspective, there is one pull factor, which is perhaps the biggest one for most investors; the sheer increase in their price. That’s right; people are investing in cryptocurrencies left and right in anticipation of possible future price increases in the crypto market. A few years ago, Bitcoin was only worth a couple of dollars, but in December 2017, it reached a whopping $17,900. In the last few years, there has been an incredible increase in its price. Likewise, other cryptocurrencies, such as Ethereum also grew considerably, although not at the same rate.

Also, it is not just the individual increase in coin prices, but the trading volume for every cryptocurrency is also increasing day by day. This is an indication that more and more investors all around the globe are entering the crypto world. These reasons are great for investing in cryptocurrencies, but most starters get confused as they don’t know where to begin. After all, there were about 1,400 cryptocurrencies trading hands at the start of 2018 and they have continued to proliferate. So, which cryptocurrencies should you buy? Here are some of the top options you should consider:

Ethereum (ETH)

The cryptocurrency industry is not very different from the nascent industries of yesteryear. A number of frontrunners emerged early, led by Bitcoin, and were then followed by the rest of the group. Over the years, the head start they got can definitely prove to be an advantage and this is exactly what has happened in the case of Ethereum. It is the second-most valuable cryptocurrency after Bitcoin and can easily be regarded as one of the best cryptocurrencies to buy.

In simple terms, a diversified portfolio comprising of digital investments, but without including Ethereum would just be negligent. It cannot be predicted by anyone what the top cryptocurrencies will be 20 years from now, but investing in Ethereum is hedging your bets. In fact, it is not very much different from investing in Apple and Microsoft in the 1990s.

Bitcoin Cash (BCH)

The name of this cryptocurrency alone gives it the cache no other cryptocurrency can have; after all, it is named after the pioneer. Certainly, if you take a look at how BCH has performed, you will admit it has staying power because it has demonstrated the ability of handling volatility better than the other tokens.

This is definitely an important quality for investors to consider, starters in particular. When you are putting your money in a highly volatile asset class, it becomes crucial to minimize the risk as much as possible. Furthermore, if you take a look at Bitcoin Cash, you will realize that it is also more functionally feasible as opposed to Bitcoin. This is mostly due to a higher block size limit that gives the network scalability as more transactions can be made on the public ledger. These are some great reasons why it is a good cryptocurrency to buy.

Binance Coin (BNB)

If you have been searching for the best altcoins to buy in the last few months, you will notice that there are only a few that have performed as well as Binance Coin. This cryptocurrency is basically the child of one of the most popular cryptocurrency exchanges these days, called Binance. Nevertheless, the BNB token has done well in its own right as it is being used all over the world for converting digital currencies between one another.

The cryptocurrency exchange provides its customers with some really strong incentives to use Binance Coin (BNB), which has helped it in gaining mainstream approval. Any investor who is looking to diversify in the cryptocurrency market should certainly consider Binance Coin as it has managed to triple its value this year, far more than Bitcoin.

Dash (DASH)

Launched back in 2014, Dash is one of the top cryptocurrencies to invest in for a myriad of reasons. The name of the cryptocurrency was introduced as a combination of two words; ‘digital’ and ‘cash’, which is quite easy to remember. The reason it has become popular is because the Dash network claims that it is the first self-funding and self-governing protocol. In contrast with Bitcoin, payments on the Dash network are cleared instantly and are validated and secured on the blockchain much faster.

The unique design of this particular cryptocurrency allows for a more democratic type of self-governance to continue, which is quite clever. This means that owners of Dash are able to submit various proposals, all of which are aimed at improving the currency’s development and its marketability. Network participants can vote and decide which one to fund.

Zcash (Zec)

Most starters don’t fully understand cryptocurrencies all that well and they are still regarded as a fringe asset class. Additionally, the blockchain technology is still in its initial innings. Regardless, there is one thing that is well-known and understood by the masses all over the world; cryptocurrencies such as Bitcoin and others gained their popularity due to the veil of anonymity they can provide.

The best part about Zcash is that it can go even further than that; when you opt for this particular virtual currency, you can enjoy a great deal more privacy. This is because it provides users with the option of concealing the identity of the sender, receiver and also the amount sent. Some might question why there would be a need for such level of privacy, but if it is what you are looking for, it is exactly what Zcash can give you.

Monero (XMR)

If you are one of those investors who put a lot of stock in technical analysis, then you should not look at Monero’s price chart. Doing so will only tempt you to tear your hair out. It is quite obvious that when the bubbly of crypto-mania burst in the beginning of 2018 as Bitcoin declined after its peak in December, 2017, Monero did not stay immune. There was a huge decline in its prices, especially a few months ago. The important to note is that XMR can rival Dash when it comes to privacy and its price is Bitcoin makes it worth investing in.

Bitcoin (BTC)

It may be last, but it is not least in any shape, way or form. Not only is Bitcoin the cryptocurrency that got the whole ball rolling, but it is also one of the best ones that any starter can invest in. On the one hand, this posterchild of crypto highlighted the inherent flaws in this digital currency such as occasionally high transaction fees, small block size and the potential of long transaction time amongst others. On the other hand, not only did Bitcoin inspired the development and launch of hundreds of other cryptocurrencies, its fame also made it the market leader. Therefore, it is quite possible that there will come a time when Bitcoin will morph into the de-facto non-governmental currency in the world, a few years into the future. If you intend to have long-term exposure to cryptocurrencies, it is a must to own some Bitcoin.

When you have made up your mind about which cryptocurrency you wish to purchase, the question is how and where to do so. If you are at this stage, the steps you need to take are outlined below:

Look for a UK licensed and regulated exchange

FCA regulated UK Cryptocurrency exchanges are the platforms that let you buy and sell different cryptocurrencies when you feel like it. Initially, there had only been a handful of exchanges such as Coinbase, Kraken etc. and they offered only a limited number of cryptocurrencies. However, things have changed a lot since then and nowadays, you can find tons of options at your disposal when it comes to choosing an exchange. Compare different exchanges and look for the one that offers the cryptocurrencies and features you are after and decide accordingly.

Sign up and make an account

Once you have chosen an exchange, you need to sign up on it, which means make an account. Most exchanges have a variety of account options, which are designed to suit different levels of traders. Since you are just starting out, you can go with the most basic option and then upgrade later on. The registration process involves providing some personal details such as name, location, email address and more. It is best to provide proof of ID and other similar information as this allows the exchange to verify your account, which can make funding and deposit easier.

Select a payment method

Exchanges will offer you a wide array of payment methods to choose from, which can be used for funding your account and making withdrawals. Obviously, you cannot buy cryptocurrencies without paying money and you can decide on a payment method after considering factors such as fees involved, speed of transaction etc. You should also be aware that there is fees associated with trading as well and exchanges will charge you for transactions you make through them.

Go with 2-factor authentication

This is highly recommended because it aids you in adding an extra layer of security to your account on the exchange. It is a given that you want your account to be as secure as possible because you are sharing sensitive and private information. With two-factor authentication, you can make sure that no one else can gain access to your account as a code is sent to your phone on logging in.

Get a wallet

You are going to need a cryptocurrency wallet for storing the crypto you buy. There are software wallets, hardware wallets and even paper wallets that you can use. Most of the exchanges out there offer you the option of storing your cryptocurrency in their wallet, but experts recommend that you use different ones and use more than one. These wallets contain encrypted passwords for unlocking funds and you also have the option of choosing between single-coin and multi-coin wallets.

These steps are quite easy to follow for anyone who uses the internet and smartphones and it will not take you long to buy cryptocurrencies. But, as mentioned above, these are a volatile asset and you need to be very careful when making investments. Starters can often end up making mistakes that can wipe out their entire investment in one go. Some of the dos and don’ts that can be immensely beneficial for beginners who are just taking their first steps in the cryptocurrency world are:

Always do your research

There is not a way to stress enough how essential it is to do thorough research in this industry. The cryptocurrency market is an unregulated one, which means there are no government rules and restrictions to be followed. Therefore, a number of pumps-and-dumps seem to be happening here and you will come across a plethora of cryptocurrencies that will simply not withstand the test of time. This industry is not without its scams and numerous cryptocurrencies have solely been created for helping the creators make a lot of money, after which they are abandoned.

Always do your own research when you are considering a cryptocurrency. You will find all the facts, news, updates and data that you need for making decisions on the internet, but the key is to know where to look. Not every website is reliable and you need to check your sources before trusting anything you come across.

Don’t kick off with day trading

It is not a good idea for you to put your entire investment capital in just one project. Don’t put all your eggs in one basket is a renowned saying and for good reason; it carries a lot of risk. Therefore, you need to learn to spread your eggs and it doesn’t matter how much potential a cryptocurrency has. There will always be rivals and competitors that come up with better and more effective strategies and they might come on the scene suddenly.

Not only should you diversify your investment, you should also learn not to investment your entire capital in one go. The responsible approach for starters is to investment about 15 percent to 20 percent of their planned investment. Again, the potential of the market in the long run is irrelevant in this decision because it is highly volatile and sensitive to updates and news, both real and rumors. You don’t want to deal with the stress of investing your entire capital in a cryptocurrency and then watching it drop 25 percent in one go.

Another advantage of making your investment in cycles is that starters can become more familiar with the general trends and the price variables. You get more time to study the industry, which can be useful for decision making in the future. Day trading should be avoided by starters because it requires you to outsmart the big institutional investors, who have been around for a while, and have years of experience to guide them. Also, the crypto market is still in its infancy and can provide higher return on investments in the long term.

Be aware of investment psychology

Be fearful when other investors are greedy and be greedy when others come off as fearful. Sell high and buy low. These are only a few basic rules starters should follow when they are investing in the cryptocurrency market, but it can be extremely tough to stick to them. FOMO (Fear of Missing Out), hype and FUD (Fear, Uncertainty and Doubt) are some of the most commonly used phrases in the crypto space and they refer to the psychological mistakes that lots of investors make. These cause investors to do the opposite of what they need to do in order to make a profit. Instead of buying low, people sell low and buy high.

Hype is applicable wen people in the crypto industry drive up the price of a coin by creating a perceived value. Most new investors took note of cryptocurrencies due to the hype because stories after stories hit the press about people making fortunes overnight in this industry. However, these motivations only compelled people to buy high as they were affected by FOMO. This was the wrong time to invest as the price of a particular crypto was soaring due to the hype, but when it was over, the price dropped.

Media also causes FUD because investors start doubting their reasons of buying the crypto in the first place and panic causes them to sell low. The important thing to realize here is that it is not possible for a cryptocurrency to go up all the time. It is a given that there will be pullbacks every now and then. Starters should avoid buying at an all-time high because they will have to sell low in the future.

Analyze your losing trades

There are profits and losses in trading, no matter what the asset and cryptocurrency is no different. When you are just a starter, you are going to suffer from some losses and that’s not something to be ashamed of. In fact, these losses can be quite valuable, but only if you analyze them. There are some traders who just opt to sweep their losses under the rug, but this is not a good thing. You need to understand exactly what went wrong as this can aid you in ensuring it doesn’t happen again. Dismantle your losing trades and figure out where correction is needed because this can improve your chances of making better trades in the future.

Don’t be inattentive

Don’t take your crypto investment lightly unless you have money you can afford to waste. Yes, the cryptocurrency industry is quite fast paced and it can be very challenging to keep up. Starters find that it can be very easy to lose focus due to which it is recommended that you set an alert. This is an excellent option you can enjoy when trading online and you will be alerted when your choice of crypto reaches a particular price. You can customize the alerts as per your risk tolerance and it will help you in keeping your losses to a minimum.

Have a proper strategy in place

Even when you are starting out in the crypto space, you have to have a plan or oversight of what you wish to achieve. The accessibility of the market often prompts people to enter the fray without giving much thought to their motivations in the long run and this can be their downfall. Sure, you can select your favorite crypto that’s doing well in the market, but then what? When should you sell? What do you wish to achieve? Have you thought about stop losses? Are you aware that the trade might not work out? All these factors need to be weighed in before you even enter the industry.

Following someone else’s moves

As cryptocurrencies are quite popular these days, starters often find themselves surrounded by like-minded traders. This can be useful to the extent that you can brainstorm strategies and ideas and try them at your own risk. Nonetheless, never get into a situation when you start depending on your peers to tell you when to make a move. When you are making a trade or exiting one, make sure you are doing it because it is what you want and not what others are telling you to do.

Don’t play favorites

You have invested in a cryptocurrency and it ended up giving you a tidy profit. It is definitely a good thing for starters, but the problem is that they start playing favorites. Since it has already given them a profit, they might be tempted to come back to it, even though they should avoid it. This is particularly true when they make a loss due to another cryptocurrency. It is crucial for every trader in the crypto space to base their decisions on facts and figures and not on emotions.

Don’t persist in the face of repetitive failure

There is no denying that persistence in the face of adversity is a very powerful strategy that can help you in overcoming numerous obstacles in your life. But, it is not the same as persistence in the case of failure. When you address adversity, it involves research, learning, introspection and self-assessment. In contrast, making consistent loss on a strategy and not making any assessments or adjustments to correct it, is one of the biggest mistakes that every beginner needs to avoid. If you suffer from consistent losses, you should avoid attributing them to ‘bad luck’ or variance.

Avoid over and under trading

As highlighted before, the cryptocurrency market is fast-paced in nature, which makes over trading a big mistake as it can leave you stressed, maxed out and trying to achieve too much in a day. You may not have intended to be a day trader, but you find yourself getting into and exiting trades several times in a day. In such situations, it is best to take a break and collect your wits. Also, it prevents you from chasing losses, but this doesn’t mean that you under trade either. A string of losses might put a freeze on your trading activities, but ignoring quality signals can also lead to regrets in the future. If you experience loss, you can take a break and analyze it, but be sure to act before it is too late. Taking a break too long is not very different from hiding in fear.

Starters can find these tips quite valuable when they have just begun their journey in the cryptocurrency market. They can save them from losing their hard earned money and allow them to make the right decisions. As long as these are kept in mind, they will be able to proper in the market and achieve their goals in the long run.